Company at a
Glance
Tortoise Energy Capital Corp. (NYSE: TYY)
is a closed-end investment company investing primarily in equity securities of
publicly-traded Master Limited Partnerships (MLPs) operating energy
infrastructure assets.
Investment Goals: Yield, Growth and
Quality
TYY seeks a high
level of total return with an emphasis on current distributions paid to
stockholders.
In seeking to
achieve
yield,
we target distributions to our
stockholders that are roughly equal to the underlying yield on a direct
investment in MLPs. In order to accomplish this, we maintain our strategy of
investing primarily in energy infrastructure companies with attractive current
yields and growth potential.
We seek to achieve distribution
growth
as revenues of our underlying companies
grow with the economy, with the population and through rate increases. This
revenue growth generally leads to increased operating profits, and when combined
with internal expansion projects and acquisitions, is expected to provide
attractive growth in distributions to us. We also seek distribution growth
through capital market strategies involving timely debt and equity offerings by
us that are typically invested in MLP issuer direct
placements.
TYY seeks to
achieve
quality
by investing in companies operating
energy infrastructure assets that are critical to the U.S. economy. Often these
assets would be difficult to replicate. We also back experienced management
teams with successful track records. By investing in us, our stockholders have
access to a portfolio that is diversified through geographic regions and across
product lines, including natural gas, natural gas liquids, crude oil and refined
products.
About Energy Infrastructure Master
Limited Partnerships
MLPs are limited
partnerships whose units trade on public exchanges such as the New York Stock
Exchange (NYSE), NYSE Alternext US and NASDAQ. Buying MLP units makes an
investor a limited partner in the MLP. There are currently approximately 70 MLPs
in the market,
mostly in industries
related to energy and natural resources.
We primarily invest
in MLPs and their affiliates in the energy infrastructure sector. Energy
infrastructure MLPs are engaged in the transportation, storage and processing of
crude oil, natural gas and refined products from production points to the end
users. Our investments are primarily in mid-stream (mostly pipeline) operations,
which typically produce steady cash flows with less exposure to
commodity prices than many alternative
investments in the broader energy industry. With the growth potential of this
sector along with
our
disciplined investment approach, we endeavor to generate a predictable and
increasing distribution stream for our investors.
A TYY Investment Versus a Direct
Investment in MLPs
We provide our
stockholders an alternative to investing directly in MLPs and their affiliates.
A direct MLP investment potentially offers an attractive distribution with a
significant portion treated as return of capital, and a historically low
correlation to returns on stocks and bonds. However, the tax characteristics of
a direct MLP investment are generally undesirable for tax-exempt investors such
as retirement plans. We are structured as a C Corporation — accruing federal and
state income taxes, based on taxable earnings and profits. Because of this
innovative structure, pioneered by Tortoise Capital Advisors, institutions and
retirement accounts are able to join individual stockholders as investors in
MLPs.
Additional features
include:
-
One Form 1099 per stockholder
at the end of the year, thus avoiding multiple K-1s and multiple state filings
for individual partnership
investments;
-
A professional management
team, with nearly 100 years combined investment experience, to select
and manage the portfolio on your
behalf;
-
The ability to access
investment grade credit markets to enhance stockholder return; and
-
Access to direct placements
and other investments not available through the public
markets.
June 30,
2010
Dear Fellow
Stockholders,
Energy
infrastructure companies performed well in the second quarter of 2010 relative
to the broader market. We believe the steady performance was a result of
economic improvement, accessible capital markets for MLP issuers and stable
operating performance. We believe TYY’s investments are well positioned in 2010
as its portfolio minimizes volatility and direct exposure to commodity
prices.
Master Limited Partnership Sector Review
and Outlook
The Tortoise MLP
Total Return Index
TM
(TMLPT) increased by
0.2 percent for our quarter ended May 31, 2010 and increased by 13.1 percent
during the six months ended May 31, 2010. In our view, the positive performance
resulted from favorable underlying business fundamentals and investors’ appetite
for the relatively high yields in the MLP sector relative to other asset
classes. Demand for refined products stabilized further as the broad economic
recovery generated an increased need for transportation fuels. Natural gas
transmission operators continued to benefit from growing production from
emerging natural gas basins which is increasing the need for pipeline takeaway
capacity.
MLP performance has
been aided by accessible capital markets, which allowed them to raise about $3.6
billion in equity and about $5.9 billion in debt during the three months ended
May 31, 2010. We expect further issuances as MLPs are forecast to invest more
than $15 billion between 2010 and 2012 in new pipeline and storage construction
projects that will support transportation of Canadian crude oil into the United
States as well as connect new areas of natural gas supply to existing demand
centers. We believe these expansion activities, in addition to continued
acquisition activity, support MLP cash distribution growth of three to five
percent in 2010.
Company Performance Review and Outlook
Our total return
based on market value, including the reinvestment of distributions, was 2.8
percent for the quarter ended May 31, 2010 and 10.6 percent for the six months
ended May 31, 2010.
We paid a
distribution of $0.40 per common share ($1.60 annualized) to our stockholders on
June 1, 2010, unchanged from the previous quarter. This represents an annualized
yield of 6.7 percent based on a closing price of $23.71 on June 1, 2010 as
compared to the yield of 9.0 percent a year ago when MLP market values were
still recovering from the financial crisis. We expect to maintain a quarterly
distribution of $0.40 per share this year and will strive to grow our
distribution once we believe such an increase is sustainable with adequate
distribution coverage.
On June 20, 2010,
we entered into an amendment to our bank credit facility that extends the
facility through June 20, 2011. Terms of the agreement provide for an unsecured
facility of $35 million at improved terms as compared to the expiring
facility.
Additional information about our financial performance is available in
the Management’s Discussion of this report.
Conclusion
We have maintained
our investment focus on yield, growth and quality as a provider of long-term
capital to the MLP sector. We believe this focus has produced, and will continue
to produce, a portfolio with a compelling risk adjusted current yield relative
to other asset classes and expect the fee-based nature of MLP cash flows, modest
leverage and adequate distribution coverage to continue to drive steady
portfolio returns. As always, we will continue to strive to provide transparent
investor information and welcome investor questions and comments.
Sincerely,
The Managing
Directors
Tortoise Capital Advisors, L.L.C.
The adviser to Tortoise Energy Capital
Corp.
|
|
|
H. Kevin Birzer
|
Zachary A. Hamel
|
Kenneth P. Malvey
|
|
|
|
|
|
|
Terry Matlack
|
David J. Schulte
|
2010 2nd Quarter
Report
1
Key
Financial Data
(Supplemental Unaudited
Information)
(dollar amounts in thousands unless otherwise
indicated)
|
The information presented
below regarding Distributable Cash Flow and Selected Operating Ratios is
supplemental non-GAAP financial information, which we believe is meaningful to
understanding our operating performance. The Selected Operating Ratios are the
functional equivalent of EBITDA for non-investment companies, and we believe
they are an important supplemental measure of performance and promote
comparisons from period- to-period. Supplemental non-GAAP measures should be
read in conjunction with our full financial
statements.
|
|
2009
|
|
2010
|
|
|
|
Q2
(1)
|
|
Q3
(1)
|
|
Q4
(1)
|
|
Q1
(1)
|
|
Q2
(1)
|
|
Total Distributions Received from
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions received from master
limited partnerships
|
|
$
|
9,396
|
|
$
|
9,407
|
|
$
|
9,823
|
|
$
|
10,410
|
|
$
|
10,626
|
|
Dividends paid in
stock
|
|
|
1,279
|
|
|
1,313
|
|
|
995
|
|
|
983
|
|
|
1,006
|
|
Other income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
Short-term interest and
dividend income
|
|
|
24
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
from investments
|
|
|
10,699
|
|
|
10,728
|
|
|
10,818
|
|
|
11,404
|
|
|
11,632
|
|
Operating Expenses Before Leverage
Costs and Current Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisory fees
|
|
|
1,027
|
|
|
1,184
|
|
|
1,257
|
|
|
1,423
|
|
|
1,561
|
|
Other operating
expenses
|
|
|
265
|
|
|
251
|
|
|
284
|
|
|
280
|
|
|
281
|
|
|
|
|
1,292
|
|
|
1,435
|
|
|
1,541
|
|
|
1,703
|
|
|
1,842
|
|
Distributable cash flow
before leverage costs and current taxes
|
|
|
9,407
|
|
|
9,293
|
|
|
9,277
|
|
|
9,701
|
|
|
9,790
|
|
Leverage costs
(2)
|
|
|
1,592
|
|
|
1,571
|
|
|
1,601
|
|
|
2,380
|
|
|
2,387
|
|
Current income tax
expense
|
|
|
17
|
|
|
19
|
|
|
19
|
|
|
18
|
|
|
98
|
|
Distributable Cash Flow
(3)
|
|
$
|
7,798
|
|
$
|
7,703
|
|
$
|
7,657
|
|
$
|
7,303
|
|
$
|
7,305
|
|
Distributions paid on common
stock
|
|
$
|
6,988
|
|
$
|
7,022
|
|
$
|
7,137
|
|
$
|
7,648
|
|
$
|
7,666
|
|
Distributions paid on common stock per share
|
|
|
0.40
|
|
|
0.40
|
|
|
0.40
|
|
|
0.40
|
|
|
0.40
|
|
Payout percentage for period
(4)
|
|
|
89.6
|
%
|
|
91.2
|
%
|
|
93.2
|
%
|
|
104.7
|
%
|
|
104.9
|
%
|
Net realized gain (loss), net of income taxes
|
|
|
(1,946
|
)
|
|
(7,068
|
)
|
|
3,512
|
|
|
3,230
|
|
|
10,693
|
|
Total assets, end of
period
|
|
|
496,644
|
|
|
501,607
|
|
|
558,496
|
|
|
641,688
|
|
|
634,648
|
|
Average total assets during period
(5)
|
|
|
463,344
|
|
|
502,957
|
|
|
529,804
|
|
|
606,691
|
|
|
653,507
|
|
Leverage (long-term debt
obligations, preferred stock and short-term borrowings)
(6)
|
|
|
185,000
|
|
|
162,300
|
|
|
164,600
|
|
|
155,000
|
|
|
156,600
|
|
Leverage as a percent of total assets
|
|
|
37.3
|
%
|
|
32.4
|
%
|
|
29.5
|
%
|
|
24.2
|
%
|
|
24.7
|
%
|
Unrealized appreciation
(depreciation), net of income taxes, end of period
|
|
|
39,808
|
|
|
69,135
|
|
|
107,305
|
|
|
146,292
|
|
|
138,342
|
|
Net assets, end of period
|
|
|
300,601
|
|
|
316,841
|
|
|
356,015
|
|
|
415,990
|
|
|
407,666
|
|
Average net assets during
period
(7)
|
|
|
268,053
|
|
|
312,710
|
|
|
341,531
|
|
|
397,957
|
|
|
424,400
|
|
Net asset value per common share
|
|
|
17.21
|
|
|
18.01
|
|
|
19.90
|
|
|
21.76
|
|
|
21.27
|
|
Market value per share
|
|
|
17.77
|
|
|
18.23
|
|
|
22.38
|
|
|
23.66
|
|
|
23.89
|
|
Shares outstanding
|
|
17,470,673
|
|
17,595,214
|
|
17,892,957
|
|
19,119,952
|
|
19,165,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Operating Ratios
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of Average Net
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions received
from investments
|
|
|
9.16
|
%
|
|
8.46
|
%
|
|
8.19
|
%
|
|
7.62
|
%
|
|
7.06
|
%
|
Operating expenses before leverage
costs and current taxes
|
|
|
1.11
|
%
|
|
1.13
|
%
|
|
1.17
|
%
|
|
1.14
|
%
|
|
1.12
|
%
|
Distributable cash flow
before leverage costs and current taxes
|
|
|
8.05
|
%
|
|
7.33
|
%
|
|
7.02
|
%
|
|
6.48
|
%
|
|
5.94
|
%
|
As a Percent of Average Net
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributable Cash Flow
(3)
|
|
|
11.54
|
%
|
|
9.77
|
%
|
|
8.99
|
%
|
|
7.44
|
%
|
|
6.83
|
%
|
(1)
|
|
Q1 is the period from December
through February. Q2 is the period from March through May. Q3 is the
period from June through August. Q4 is the period from September through
November.
|
(2)
|
|
Leverage costs include interest
expense, other recurring leverage expenses and distributions to preferred
stockholders.
|
(3)
|
|
“Net investment income (loss),
before income taxes” on the Statement of Operations is adjusted as follows
to reconcile to Distributable Cash Flow (DCF): increased by the return of
capital on MLP distributions, the value of paid-in-kind distributions,
premium on redemption of long-term debt obligations, other non-recurring
leverage expenses and amortization of debt issuance costs; and decreased
by distributions to preferred stockholders and current taxes
paid.
|
(4)
|
|
Distributions paid as a percentage
of Distributable Cash Flow.
|
(5)
|
|
Computed by averaging month-end
values within each period.
|
(6)
|
|
The balance on the short-term
credit facility was $1,600,000 as of May 31, 2010.
|
(7)
|
|
Computed by averaging daily values
within each period.
|
(8)
|
|
Annualized for periods less than
one full year. Operating ratios contained in our Financial Highlights are
based on net assets and include current and deferred income tax expense
and leverage costs.
|
2
Tortoise Energy Capital Corp.
Management’s Discussion
(Unaudited)
|
The information contained in this section
should be read in conjunction with our Financial Statements and the Notes
thereto. In addition, this report contains certain forward-looking statements.
These statements include the plans and objectives of management for future
operations and financial objectives and can be identified by the use of
forward-looking terminology such as “may,” “will,” “expect,” “intend,”
“anticipate,” “estimate,” or “continue” or the negative thereof or other
variations thereon or comparable terminology. These forward-looking statements
are subject to the inherent uncertainties in predicting future results and
conditions. Certain factors that could cause actual results and conditions to
differ materially from those projected in these forward-looking statements are
set forth in the “Risk Factors” section of our public filings with the
SEC.
Overview
Tortoise Energy
Capital Corp’s (the “Company”) goal is to provide a stable and growing
distribution stream to our investors. We seek to provide our stockholders with
an efficient vehicle to invest in the energy infrastructure sector. While we are
a registered investment company under the Investment Company Act of 1940, as
amended (the “1940 Act”), we are not a “regulated investment company” for
federal tax purposes. Our distributions do not generate unrelated business
taxable income (UBTI) and our stock may therefore be suitable for holding by
pension funds, IRAs and mutual funds, as well as taxable accounts. We invest
primarily in MLPs through private and public market purchases. MLPs are publicly
traded partnerships whose equity interests are traded in the form of units on
public exchanges, such as the NYSE or NASDAQ. Tortoise Capital Advisors, L.L.C.
serves as our investment adviser.
Company Update
The total market
value of our MLP investments ended the 2nd quarter 2010 relatively unchanged
from February 28, 2010, while distributions we received from our MLPs during the
quarter were in-line with our expectations. Subsequent to quarter-end, we
amended our bank credit facility at improved terms as compared to the expiring
facility. Additional information on these events and results of our operations
are discussed in more detail below.
Critical Accounting
Policies
The financial
statements are based on the selection and application of critical accounting
policies, which require management to make significant estimates and
assumptions. Critical accounting policies are those that are both important to
the presentation of our financial condition and results of operations and
require management’s most difficult, complex, or subjective judgments. Our
critical accounting policies are those applicable to the valuation of
investments, tax matters and certain revenue recognition matters as discussed in
Note 2 in the Notes to Financial Statements.
Determining Distributions to
Stockholders
Our portfolio
generates cash flow from which we pay distributions to stockholders. Our Board
of Directors considers our distributable cash flow (“DCF”) in determining
distributions to stockholders. Our Board of Directors reviews the distribution
rate quarterly, and may adjust the quarterly distribution throughout the year.
Our goal is to declare what we believe to be sustainable increases in our
regular quarterly distributions. We have targeted to pay at least 95 percent of
DCF on an annualized basis.
Determining DCF
DCF is simply
distributions received from investments less expenses. The total distributions
received from our investments include the amount received by us as cash
distributions from MLPs, paid-in-kind distributions, and dividend and interest
payments. The total expenses include current or anticipated operating expenses,
leverage costs and current income taxes. Each are summarized for you in the
table on page 2 and are discussed in more detail below.
The Key Financial
Data table discloses the calculation of DCF and should be read in conjunction
with this discussion. The difference between distributions received from
investments in the DCF calculation and total investment income as reported in
the Statement of Operations, is reconciled as follows: GAAP recognizes that a
significant
portion of the
cash distributions received from MLPs are characterized as a return of capital
and therefore excluded from investment income, whereas the DCF calculation
includes the return of capital; and, distributions received from investments in
the DCF calculation include the value of dividends paid-in-kind (additional
stock or MLP units), whereas such amounts are not included as income for GAAP
purposes. The treatment of expenses in the DCF calculation also differs from
what is reported in the Statement of Operations. In addition to the total
operating expenses as disclosed in the Statement of Operations, the DCF
calculation reflects interest expense, other recurring leverage expenses,
distributions to preferred stockholders, as well as current taxes paid. A
reconciliation of Net Investment Loss, before Income Taxes to DCF is included
below.
Distributions Received from
Investments
Our ability to
generate cash is dependent on the ability of our portfolio of investments to
generate cash flow from their operations. In order to maintain and grow
distributions to our stockholders, we evaluate each holding based upon its
contribution to our investment income, our expectation for its growth rate, and
its risk relative to other potential investments.
We concentrate on
MLPs we believe can expect an increasing demand for services from economic and
population growth. We seek well-managed businesses with hard assets and stable
recurring revenue streams. Our focus remains primarily on investing in fee-based
service providers that operate long-haul, interstate pipelines. We further
diversify among issuers, geographies and energy commodities to seek a
distribution payment which approximates an investment directly in energy
infrastructure MLPs. In addition, most energy infrastructure companies are
regulated and utilize an inflation escalator index that factors in inflation as
a cost pass-through. So, over the long-term, we believe MLPs’ distributions will
outpace inflation and interest rate increases, and produce positive real
returns.
Total distributions
received from our investments for the 2nd quarter 2010 was approximately $11.6
million, representing a 9 percent increase as compared to 2nd quarter 2009 and a
2 percent increase as compared to the 1st quarter 2010. These changes reflect
distribution increases from our MLP investments, distributions received from the
investment of the net proceeds from our January 2010 common stock issuance and
the distributions received from approximately $4 million of additional portfolio
securities purchased during the 2nd quarter 2010 utilizing cash and our bank
credit facility.
Expenses
We incur two types
of expenses: (1) operating expenses, consisting primarily of the advisory fee;
and (2) leverage costs. On a percentage basis, operating expenses before
leverage costs and current taxes were an annualized 1.12 percent of average
total assets for the 2nd quarter 2010 as compared to 1.11 percent for the 2nd
quarter 2009 and 1.14 percent for the 1st quarter 2010. The slight decrease from
1st quarter 2010 reflects the economy of scale benefit of spreading relatively
unchanged fixed expenses over increased average total assets. Advisory fees for
the 2nd quarter 2010 increased 10 percent from 1st quarter 2010 as a result of
increased average managed assets for the quarter. Average managed assets
increased primarily from increasing MLP asset values during the quarter,
although MLP asset values ended the 2nd quarter slightly below where they began
the quarter. Yields on our MLP investments have generally reverted to their
long-term historical average. All else being equal, if MLP yields continue to
tighten, MLP asset values will increase as will our managed assets and advisory
fees.
Leverage costs
consist of two major components: (1) the direct interest expense on our Tortoise
Notes and short-term credit facility; and (2) distributions to preferred
stockholders. Other leverage expenses include rating agency fees and commitment
fees. Total leverage costs for DCF purposes were approximately $2.4 million for
the 2nd quarter 2010 as compared to $1.6 million for the 2nd quarter 2009 and
$2.4 million for the 1st quarter 2010. The change in total leverage costs for
these periods reflects the redemption of our auction rate preferred stock and
the issuance of our mandatorily redeemable preferred stock.
The weighted
average annual rate of our longer-term fixed-rate leverage is 5.81 percent. This
rate does not include balances on our bank line of credit which was amended on
June 20, 2010 to accrue interest at a variable rate equal to one-month LIBOR
plus 1.25
2010 2nd Quarter
Report
3
Management’s Discussion
(Unaudited)
(Continued)
|
percent. Our weighted average
rate may vary in future periods as our leverage matures or is redeemed.
Additional information on our leverage and amended credit facility is disclosed
below in Liquidity and Capital Resources and in our Notes to Financial
Statements.
Current income tax expense increased $80,000 in the 2nd quarter as
compared to 1st quarter 2010 resulting from increased Canadian taxes associated
with our investment in Plains All American Pipeline, L.P.
Distributable Cash
Flow
For 2nd quarter
2010, our DCF was approximately $7.3 million, a decrease of 6 percent as
compared to 2nd quarter 2009 and a slight increase as compared to 1st quarter
2010. These changes are the net result of increased distributions and expenses
as outlined above. Throughout the 2009 fiscal year, we anticipated and planned
for the impact the redemption of our auction rate preferred and the issuance of
our MRP shares at current market rates would have on our DCF. In an effort to
smooth the refinancing impact, we distributed only 90.4 percent of available DCF
for fiscal year 2009, which equates to approximately $2 million of undistributed
DCF carried into fiscal year 2010. For 2nd quarter 2010, we declared a
distribution of $7.7 million, or 104.9 percent of DCF. As a result, we utilized
approximately $0.4 million of our fiscal year 2009 undistributed DCF. We
currently anticipate that our DCF payout ratio will trend down during the second
half of 2010 as expected distribution increases from our MLPs exceed projected
increases in expenses. On a per share basis, we declared a $0.40 distribution on
May 10, 2010. This is unchanged as compared to 2nd quarter 2009 and 1st quarter
2010. We expect to maintain quarterly distributions to our stockholders of $0.40
per share during the remainder of 2010.
Net investment loss
before income taxes on the Statement of Operations is adjusted as follows to
reconcile to DCF for 2010 YTD and the 2nd quarter 2010 (in
thousands):
|
2010 YTD
|
|
2nd Qtr 2010
|
Net Investment Loss, before Income
Taxes
|
$
|
(9,139
|
)
|
$
|
(6,408
|
)
|
Adjustments to reconcile to DCF:
|
|
|
|
|
|
|
Dividends paid in
stock
|
|
1,989
|
|
|
1,006
|
|
Return of capital on
distributions
|
|
21,731
|
|
|
12,732
|
|
Amortization of debt issuance
costs
|
|
143
|
|
|
73
|
|
Current income tax
expenses
|
|
(116
|
)
|
|
(98
|
)
|
DCF
|
$
|
14,608
|
|
$
|
7,305
|
|
|
|
|
|
|
|
|
Liquidity and Capital
Resources
We had total assets
of $635 million at quarter-end. Our total assets reflect the value of our
investments, which are itemized in the Schedule of Investments. It also reflects
cash, interest and receivables and any expenses that may have been prepaid.
During 2nd quarter 2010, total assets decreased from $642 million to $635
million, a decrease of $7 million. This change was primarily the result of a net
realized and unrealized loss on investments of approximately $8 million during
the quarter (excluding return of capital on distributions reflected during the
quarter).
Total leverage
outstanding at May 31, 2010 of $156.6 million is comprised of $90 million in
senior notes, $65 million in MRP stock and $1.6 million outstanding under the
credit facility. We no longer have any auction rate securities outstanding.
Total leverage represented 24.7 percent of total assets at May 31, 2010, as
compared to 24.2 percent as of February 28, 2010 and 37.3 percent as of May 31,
2009. We have a long-term leverage target ratio of 25 percent of total assets at
time of incurrence. Temporary increases of up to 30 percent of our total assets
may be permitted, provided that such leverage is consistent with the limits set
forth in the 1940 Act, and that such leverage is expected to be reduced over
time in an orderly fashion to reach our long-term target. Our leverage ratio is
impacted by increases or decreases in MLP values, issuance of equity and/or the
sale of securities where proceeds are used to reduce leverage.
Subsequent to
quarter-end, we entered into an amendment to our bank credit facility that
extends the facility through June 20, 2011. Terms of the amendment provide for
an unsecured facility of $35 million, a reduction of $15 million from the
previous facility. During the extension, outstanding balances generally will
accrue interest at a variable rate equal to one-month LIBOR plus 1.25 percent
with a fee of 0.20 percent on any unused balance. These new terms compare
favorably to the previous terms of one-month LIBOR plus 2.00 percent with a fee
of 0.25 percent on any unused balance.
Our longer-term
leverage (excluding our bank credit facility) of $155 million is comprised of 58
percent private placement debt and 42 percent publicly placed preferred equity
with a weighted average fixed rate of 5.81 percent and weighted average laddered
maturity of 4.7 years.
We have used
leverage to acquire MLPs consistent with our investment philosophy. The terms of
our leverage are governed by regulatory and contractual asset coverage
requirements that arise from the use of leverage. Additional information on our
leverage and asset coverage requirements is discussed in Note 8 and Note 9 in
the Notes to Financial Statements. Our coverage ratios are updated each week on
our web site at www.tortoiseadvisors.com.
Taxation of our Distributions and
Deferred Taxes
We invest in
partnerships which generally have larger distributions of cash than the
accounting income which they generate. Accordingly, the distributions include a
return of capital component for accounting and tax purposes. Distributions
declared and paid by us in a year generally differ from taxable income for that
year, as such distributions may include the distribution of current year taxable
income or return of capital.
The taxability of
the distribution you receive depends on whether we have annual earnings and
profits. If so, those earnings and profits are first allocated to the preferred
shares and then to the common shares.
In the event we
have earnings and profits allocated to the common shares, all or a portion of
our distribution will be taxable at the 15 percent Qualified Dividend Income
(“QDI”) rate, assuming various holding requirements are met by the stockholder.
The 15 percent QDI rate is currently effective through 2010. The portion of our
distribution that is taxable may vary for either of two reasons: first, the
characterization of the distributions we receive from MLPs could change annually
based upon the K-1 allocations and result in less return of capital and more in
the form of income. Second, we could sell an MLP investment and realize a gain
or loss at any time. It is for these reasons that we inform you of the tax
treatment after the close of each year as the ultimate characterization of our
distributions is undeterminable until the year is over.
For book and tax
purposes, distributions to stockholders for the fiscal year ended 2009 were
comprised of 100 percent return of capital. A holder of our common stock would
reduce their cost basis for income tax purposes by the entire amount of the 2009
distribution. This information is reported to stockholders on Form 1099-DIV and
is available on our web site at www.tortoiseadvisors.com.
The unrealized gain
or loss we have in the portfolio is reflected in the Statement of Assets and
Liabilities. At May 31, 2010, our investments are valued at $633 million, with
an adjusted cost of $420 million. The $213 million difference reflects
unrealized appreciation that would be realized for financial statement purposes
if those investments were sold at those values. The Statement of Assets and
Liabilities also reflects either a deferred tax liability or deferred tax asset
depending primarily upon unrealized gains (losses) on investments, realized
gains (losses) on investments, capital loss carryforward and net operating
losses. At May 31, 2010, the balance sheet reflects a net deferred tax liability
of approximately $59.9 million or $3.12 per share. Accordingly, our net asset
value per share represents the amount which would be available for distribution
to stockholders after payment of taxes. Details of our deferred taxes are
disclosed in Note 5 in our Notes to Financial Statements.
4
Tortoise Energy Capital
Corp.
S
CHEDULE OF
I
NVESTMENTS
May 31, 2010
|
(Unaudited)
|
|
|
Shares
|
|
Fair Value
|
Master Limited Partnerships
and
|
|
|
|
|
|
|
Related Companies — 155.2%
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Crude/Refined Products Pipelines —
68.6%
(1)
|
|
|
|
|
United States — 68.6%
(1)
|
|
|
|
|
|
|
Blueknight Energy Partners,
L.P.
(2)
|
|
436,674
|
|
$
|
3,930,066
|
|
Buckeye Partners, L.P.
|
|
189,200
|
|
|
10,727,640
|
|
Enbridge Energy Partners,
L.P.
|
|
1,064,000
|
|
|
52,955,280
|
|
Holly Energy Partners, L.P.
|
|
312,000
|
|
|
12,545,520
|
|
Kinder Morgan Management, LLC
(3)
|
|
956,728
|
|
|
52,993,149
|
|
Magellan Midstream Partners, L.P.
|
|
598,700
|
|
|
26,211,086
|
|
NuStar Energy L.P.
|
|
583,557
|
|
|
32,206,511
|
|
Plains All American Pipeline, L.P.
|
|
743,600
|
|
|
42,801,616
|
|
Sunoco Logistics Partners
L.P.
|
|
690,100
|
|
|
45,408,580
|
|
|
|
|
|
|
279,779,448
|
|
Natural Gas/Natural Gas Liquids
Pipelines — 58.8%
(1)
|
|
|
United States — 58.8%
(1)
|
|
|
|
|
|
|
Boardwalk Pipeline Partners,
LP
|
|
746,157
|
|
|
20,780,472
|
|
Duncan Energy Partners L.P.
|
|
283,800
|
|
|
7,191,492
|
|
El Paso Pipeline Partners,
L.P.
|
|
875,500
|
|
|
24,155,045
|
|
Energy Transfer Equity, L.P.
|
|
121,000
|
|
|
3,720,750
|
|
Energy Transfer Partners,
L.P.
|
|
1,153,600
|
|
|
50,873,760
|
|
Enterprise Products Partners L.P.
|
|
1,291,800
|
|
|
43,404,480
|
|
Niska Gas Storage Partners
LLC
|
|
220,200
|
|
|
4,150,770
|
|
ONEOK Partners, L.P.
|
|
380,000
|
|
|
22,765,800
|
|
PAA Natural Gas Storage,
L.P.
|
|
150,919
|
|
|
3,584,326
|
|
Spectra Energy Partners, LP
|
|
303,900
|
|
|
9,420,900
|
|
TC PipeLines, LP
|
|
869,200
|
|
|
33,046,984
|
|
Williams Partners L.P.
|
|
184,096
|
|
|
6,861,258
|
|
Williams Pipeline Partners
L.P.
|
|
342,800
|
|
|
9,584,688
|
|
|
|
|
|
|
239,540,725
|
|
Natural Gas Gathering/Processing —
21.5%
(1)
|
|
|
|
|
United States — 21.5%
(1)
|
|
|
|
|
|
|
Copano Energy, L.L.C.
|
|
736,700
|
|
|
18,071,251
|
|
DCP Midstream Partners, LP
|
|
404,100
|
|
|
12,082,590
|
|
MarkWest Energy Partners,
L.P.
|
|
612,600
|
|
|
17,930,802
|
|
Regency Energy Partners LP
|
|
623,900
|
|
|
14,349,700
|
|
Targa Resources Partners
LP
|
|
970,238
|
|
|
21,975,891
|
|
Western Gas Partners LP
|
|
141,430
|
|
|
3,152,475
|
|
|
|
|
|
|
87,562,709
|
|
Propane Distribution — 5.6%
(1)
|
|
|
|
|
|
|
United States — 5.6%
(1)
|
|
|
|
|
|
|
Inergy, L.P.
|
|
627,000
|
|
|
22,904,310
|
|
Shipping — 0.7%
(1)
|
|
|
|
|
|
|
Republic of the Marshall Islands —
0.7%
(1)
|
|
|
|
|
|
|
Teekay LNG Partners L.P.
|
|
98,200
|
|
|
2,837,980
|
|
Total Master Limited Partnerships and
|
|
|
|
|
|
|
Related Companies (Cost
$419,791,229)
|
|
|
|
|
632,625,172
|
|
Short-Term Investment — 0.0%
(1)
|
|
|
|
|
|
|
United States Investment Company —
0.0%
(1)
|
|
|
|
|
|
|
Fidelity Institutional Government
Portfolio —
|
|
|
|
|
|
|
Class I, 0.08%
(4)
(Cost $52,180)
|
|
52,180
|
|
|
52,180
|
|
Total Investments — 155.2%
(1)
|
|
|
|
|
|
|
(Cost
$419,843,409)
|
|
|
|
|
632,677,352
|
|
Other Assets and Liabilities —
(17.2%)
(1)
|
|
|
|
|
(70,011,392
|
)
|
Long-Term Debt Obligations —
(22.1%)
(1)
|
|
|
|
|
(90,000,000
|
)
|
Mandatory Redeemable Preferred
Shares
|
|
|
|
|
|
|
at Redemption Value — (15.9%)
(1)
|
|
|
|
|
(65,000,000
|
)
|
Total Net Assets Applicable
to
|
|
|
|
|
|
|
Common Stockholders — 100.0%
(1)
|
|
|
|
$
|
407,665,960
|
|
|
|
|
|
|
|
|
(1)
|
|
Calculated as a percentage of net
assets applicable to common stockholders.
|
(2)
|
|
Non-income
producing.
|
(3)
|
|
Security distributions are
paid-in-kind.
|
(4)
|
|
Rate indicated is the current yield
as of May 31, 2010.
|
See accompanying Notes to Financial
Statements.
2010 2nd
Quarter Report
5
S
TATEMENT OF
A
SSETS
&
L
IABILITIES
May 31,
2010
|
(Unaudited)
|
Assets
|
|
|
|
|
Investments at fair value (cost
$419,843,409)
|
|
$
|
632,677,352
|
|
Receivable for investments
sold
|
|
|
57,725
|
|
Prepaid expenses and other
assets
|
|
|
1,913,364
|
|
Total assets
|
|
|
634,648,441
|
|
Liabilities
|
|
|
|
|
Payable to Adviser
|
|
|
1,039,321
|
|
Distributions payable to
common stockholders
|
|
|
7,666,206
|
|
Payable for investments
purchased
|
|
|
54,003
|
|
Accrued expenses and other
liabilities
|
|
|
1,651,646
|
|
Current tax
liability
|
|
|
90,000
|
|
Deferred tax
liability
|
|
|
59,881,305
|
|
Short-term
borrowings
|
|
|
1,600,000
|
|
Long-term debt
obligations
|
|
|
90,000,000
|
|
Mandatory redeemable
preferred stock ($10.00 liquidation
|
|
|
|
|
value per share; 6,500,000
shares outstanding)
|
|
|
65,000,000
|
|
Total liabilities
|
|
|
226,982,481
|
|
Net assets applicable to
common stockholders
|
|
$
|
407,665,960
|
|
Net Assets Applicable to Common
Stockholders Consist of:
|
|
|
Capital stock, $0.001 par
value; 19,165,514 shares issued
|
|
|
|
|
and outstanding (100,000,000
shares authorized)
|
|
$
|
19,166
|
|
Additional paid-in
capital
|
|
|
311,402,558
|
|
Accumulated net investment
loss, net of income taxes
|
|
|
(43,893,757
|
)
|
Accumulated realized gain,
net of income taxes
|
|
|
1,796,480
|
|
Net unrealized appreciation
of investments, net of income taxes
|
|
|
138,341,513
|
|
Net assets applicable to
common stockholders
|
|
$
|
407,665,960
|
|
Net Asset Value per common
share outstanding
|
|
|
|
|
(net assets applicable to
common stock,
|
|
|
|
|
divided by common shares
outstanding)
|
|
$
|
21.27
|
|
|
|
|
|
|
S
TATEMENT OF
O
PERATIONS
|
Period from
December 1, 2009 through May 31, 2010
|
(Unaudited)
|
Investment Income
|
|
|
|
|
Distributions from master limited
partnerships
|
|
$
|
21,035,810
|
|
Less return of capital on
distributions
|
|
|
(21,730,778
|
)
|
Net distributions from master
limited partnerships
|
|
|
(694,968
|
)
|
Other income
|
|
|
11,396
|
|
Dividends from money market mutual
funds
|
|
|
118
|
|
Total Investment
Loss
|
|
|
(683,454
|
)
|
Operating Expenses
|
|
|
|
|
Advisory fees
|
|
|
2,984,289
|
|
Administrator fees
|
|
|
136,553
|
|
Professional fees
|
|
|
118,523
|
|
Reports to stockholders
|
|
|
59,593
|
|
Franchise fees
|
|
|
56,273
|
|
Directors’ fees
|
|
|
48,168
|
|
Custodian fees and
expenses
|
|
|
34,488
|
|
Fund accounting fees
|
|
|
30,167
|
|
Registration fees
|
|
|
23,011
|
|
Stock transfer agent fees
|
|
|
8,204
|
|
Other operating
expenses
|
|
|
45,303
|
|
Total Operating
Expenses
|
|
|
3,544,572
|
|
Interest expense
|
|
|
2,814,366
|
|
Distributions to mandatory
redeemable preferred stockholders
|
|
|
1,820,793
|
|
Amortization of debt issuance
costs
|
|
|
143,898
|
|
Other leverage expenses
|
|
|
131,929
|
|
Total Leverage
Expenses
|
|
|
4,910,986
|
|
Total Expenses
|
|
|
8,455,558
|
|
Net Investment Loss, before Income
Taxes
|
|
|
(9,139,012
|
)
|
Current tax expense
|
|
|
(144,176
|
)
|
Deferred tax
benefit
|
|
|
2,785,712
|
|
Income tax benefit, net
|
|
|
2,641,536
|
|
Net Investment
Loss
|
|
|
(6,497,476
|
)
|
Realized and Unrealized Gain on
Investments
|
|
|
|
|
Net realized gain on
investments, before income taxes
|
|
|
22,420,139
|
|
Deferred tax expense
|
|
|
(8,497,233
|
)
|
Net realized gain on
investments
|
|
|
13,922,906
|
|
Net unrealized appreciation of
investments, before income taxes
|
|
|
49,977,806
|
|
Deferred tax
expense
|
|
|
(18,941,589
|
)
|
Net unrealized appreciation of
investments
|
|
|
31,036,217
|
|
Net Realized and Unrealized Gain on
Investments
|
|
|
44,959,123
|
|
Net Increase in Net Assets
Applicable to Common Stockholders
|
|
|
|
|
Resulting from
Operations
|
|
$
|
38,461,647
|
|
|
|
|
|
|
See accompanying Notes to Financial
Statements.
6
Tortoise Energy
Capital Corp.
S
TATEMENT OF
C
HANGES IN
N
ET
A
SSETS
|
|
|
Period from
|
|
|
|
|
December 1, 2009
|
|
|
|
|
through
|
|
Year Ended
|
|
|
May 31, 2010
|
|
November 30,
2009
|
|
|
(Unaudited)
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
Net investment loss
|
|
$
|
(6,497,476
|
)
|
|
$
|
(4,441,015
|
)
|
Net realized gain (loss) on
investments
|
|
|
13,922,906
|
|
|
|
(19,884,908
|
)
|
Net unrealized appreciation of
investments
|
|
|
31,036,217
|
|
|
|
176,711,971
|
|
Distributions to auction
preferred stockholders
|
|
|
—
|
|
|
|
(783,875
|
)
|
Net increase
in net assets applicable to common stockholders resulting
|
|
|
|
|
|
|
|
|
from operations
|
|
|
38,461,647
|
|
|
|
151,602,173
|
|
Distributions to Common
Stockholders
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
—
|
|
|
|
—
|
|
Return of
capital
|
|
|
(15,314,186
|
)
|
|
|
(28,135,706
|
)
|
Total
distributions to common stockholders
|
|
|
(15,314,186
|
)
|
|
|
(28,135,706
|
)
|
Capital Stock
Transactions
|
|
|
|
|
|
|
|
|
Proceeds from shelf offerings of 1,226,995
and 310,701 common shares, respectively
|
|
|
27,852,787
|
|
|
|
6,220,926
|
|
Underwriting discounts and offering expenses associated with the issuance
of
|
|
|
|
|
|
|
|
|
common
stock
|
|
|
(386,528
|
)
|
|
|
(282,725
|
)
|
Issuance
of 45,562 and 111,583 common shares from reinvestment of
distributions
|
|
|
|
|
|
|
|
|
to
stockholders, respectively
|
|
|
1,037,447
|
|
|
|
2,126,976
|
|
Net increase
in net assets applicable to common stockholders from
capital
|
|
|
|
|
|
|
|
|
stock transactions
|
|
|
28,503,706
|
|
|
|
8,065,177
|
|
Total increase in net assets applicable to
common stockholders
|
|
|
51,651,167
|
|
|
|
131,531,644
|
|
Net Assets
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
356,014,793
|
|
|
|
224,483,149
|
|
End of
period
|
|
$
|
407,665,960
|
|
|
$
|
356,014,793
|
|
Accumulated net investment loss, net of
income taxes, end of period
|
|
$
|
(43,893,757
|
)
|
|
$
|
(37,396,281
|
)
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Financial
Statements.
2010 2nd Quarter
Report
7
S
TATEMENT OF
C
ASH
F
LOWS
Period from December 1, 2009 through May 31,
2010
|
(Unaudited)
|
Cash Flows From Operating
Activities
|
|
|
|
|
Distributions received from master limited
partnerships
|
|
$
|
21,035,810
|
|
Dividend
income received
|
|
|
111
|
|
Other income received
|
|
|
11,396
|
|
Purchases of long-term investments
|
|
|
(71,685,770
|
)
|
Proceeds from sales of long-term
investments
|
|
|
46,010,452
|
|
Purchases of short-term investments, net
|
|
|
(27,787
|
)
|
Interest expense paid
|
|
|
(2,812,617
|
)
|
Distributions to mandatory redeemable preferred
stockholders
|
|
|
(1,526,792
|
)
|
Income taxes paid
|
|
|
(33,833
|
)
|
Other
leverage expenses paid
|
|
|
(23,449
|
)
|
Operating expenses paid
|
|
|
(3,486,322
|
)
|
Net
cash used in operating activities
|
|
|
(12,538,801
|
)
|
Cash Flows From Financing
Activities
|
|
|
|
|
Advances from revolving line
of credit
|
|
|
31,450,000
|
|
Repayments on revolving line of
credit
|
|
|
(44,450,000
|
)
|
Issuance of common
stock
|
|
|
27,852,787
|
|
Issuance of mandatory redeemable
preferred stock
|
|
|
5,000,000
|
|
Common stock issuance
costs
|
|
|
(389,030
|
)
|
Debt issuance costs
|
|
|
(314,144
|
)
|
Distributions paid to common
stockholders
|
|
|
(6,610,812
|
)
|
Net
cash provided by financing activities
|
|
|
12,538,801
|
|
Net change in cash
|
|
|
—
|
|
Cash — beginning of
period
|
|
|
—
|
|
Cash — end of
period
|
|
$
|
—
|
|
Reconciliation of net increase in
net assets applicable to
|
|
|
|
|
common stockholders resulting from
operations to net cash
|
|
used in operating
activities
|
|
|
|
|
Net increase in net assets
applicable to common
|
|
|
|
|
stockholders resulting from
operations
|
|
$
|
38,461,647
|
|
Adjustments to reconcile net
increase in net assets
|
|
|
|
|
applicable to common stockholders
resulting from
|
|
|
|
|
operations to net cash used in
operating activities:
|
|
|
|
|
Purchases of long-term
investments
|
|
|
(71,555,691
|
)
|
Return of capital on
distributions received
|
|
|
21,730,778
|
|
Proceeds from sales of
long-term investments
|
|
|
45,359,059
|
|
Purchases of short-term
investments, net
|
|
|
(27,787
|
)
|
Deferred tax
expense
|
|
|
24,653,110
|
|
Net unrealized appreciation
of investments
|
|
|
(49,977,806
|
)
|
Net realized gain on
investments
|
|
|
(22,420,139
|
)
|
Amortization of debt issuance
costs
|
|
|
143,898
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
Decrease in receivable for
investments sold
|
|
|
651,358
|
|
Decrease in prepaid expenses
and other assets
|
|
|
34,218
|
|
Increase in payable to
Adviser
|
|
|
179,796
|
|
Decrease in payable for
investments purchased
|
|
|
(130,079
|
)
|
Increase in current tax
liability
|
|
|
90,000
|
|
Increase in accrued expenses
and other liabilities
|
|
|
268,837
|
|
Total adjustments
|
|
|
(51,000,448
|
)
|
Net cash used in operating
activities
|
|
$
|
(12,538,801
|
)
|
Non-Cash Financing
Activities
|
|
|
|
|
Reinvestment of distributions
by common stockholders
|
|
|
|
|
in additional common
shares
|
|
$
|
1,037,447
|
|
|
|
|
|
|
See accompanying Notes to Financial
Statements.
8
Tortoise Energy
Capital Corp.
|
|
Period from
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
December 1, 2009
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
May 31, 2005
(1)
|
|
|
through
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
through
|
|
|
May 31, 2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
November 30,
2005
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share Data
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset Value, beginning of
period
|
|
|
$
|
19.90
|
|
|
|
$
|
12.85
|
|
|
|
$
|
27.84
|
|
|
|
$
|
26.79
|
|
|
|
$
|
23.23
|
|
|
|
$
|
—
|
|
Public
offering price
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
25.00
|
|
Underwriting discounts and offering costs
on issuance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of common
and auction preferred stock
(3)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(0.03
|
)
|
|
|
|
(0.06
|
)
|
|
|
|
(1.18
|
)
|
Premiums
less underwriting discounts and offering costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on issuance
of common stock
(4)
|
|
|
|
0.07
|
|
|
|
|
0.01
|
|
|
|
|
—
|
|
|
|
|
(0.12
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
Income (loss) from Investment
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)
(5)(6)
|
|
|
|
(0.34
|
)
|
|
|
|
(0.20
|
)
|
|
|
|
(0.89
|
)
|
|
|
|
(0.64
|
)
|
|
|
|
(0.36
|
)
|
|
|
|
0.04
|
|
Net realized
and unrealized gains (losses) on investments and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest rate swap contracts
(5)(6)
|
|
|
|
2.44
|
|
|
|
|
8.88
|
|
|
|
|
(12.05
|
)
|
|
|
|
3.80
|
|
|
|
|
5.68
|
|
|
|
|
(0.05
|
)
|
Total increase (decrease) from investment operations
|
|
|
|
2.10
|
|
|
|
|
8.68
|
|
|
|
|
(12.94
|
)
|
|
|
|
3.16
|
|
|
|
|
5.32
|
|
|
|
|
(0.01
|
)
|
Less Distributions to Auction Preferred
Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Return of
capital
|
|
|
|
—
|
|
|
|
|
(0.04
|
)
|
|
|
|
(0.35
|
)
|
|
|
|
(0.33
|
)
|
|
|
|
(0.19
|
)
|
|
|
|
—
|
|
Total distributions to auction preferred stockholders
|
|
|
|
—
|
|
|
|
|
(0.04
|
)
|
|
|
|
(0.35
|
)
|
|
|
|
(0.33
|
)
|
|
|
|
(0.19
|
)
|
|
|
|
—
|
|
Less Distributions to Common
Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(0.03
|
)
|
Return of
capital
|
|
|
|
(0.80
|
)
|
|
|
|
(1.60
|
)
|
|
|
|
(1.70
|
)
|
|
|
|
(1.63
|
)
|
|
|
|
(1.51
|
)
|
|
|
|
(0.55
|
)
|
Total distributions to common stockholders
|
|
|
|
(0.80
|
)
|
|
|
|
(1.60
|
)
|
|
|
|
(1.70
|
)
|
|
|
|
(1.63
|
)
|
|
|
|
(1.51
|
)
|
|
|
|
(0.58
|
)
|
Net Asset Value, end of period
|
|
|
$
|
21.27
|
|
|
|
$
|
19.90
|
|
|
|
$
|
12.85
|
|
|
|
$
|
27.84
|
|
|
|
$
|
26.79
|
|
|
|
$
|
23.23
|
|
Per common share market value, end
of period
|
|
|
$
|
23.89
|
|
|
|
$
|
22.38
|
|
|
|
$
|
11.11
|
|
|
|
$
|
25.47
|
|
|
|
$
|
26.50
|
|
|
|
$
|
22.09
|
|
Total Investment Return Based on Market Value
(7)
|
|
|
|
10.55
|
%
|
|
|
|
120.32
|
%
|
|
|
|
(52.44
|
)%
|
|
|
|
1.73
|
%
|
|
|
|
27.67
|
%
|
|
|
|
(8.33
|
)%
|
See accompanying Notes to Financial
Statements.
2010 2nd Quarter Report
|
|
9
|
F
INANCIAL
H
IGHLIGHTS
(Continued)
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
December 1, 2009
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
Year Ended
|
|
May 31, 2005
(1)
|
|
|
through
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
November 30,
|
|
through
|
|
|
May 31, 2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
November 30,
2005
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data and
Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to common
stockholders, end of period (000’s)
|
|
|
$
|
407,666
|
|
|
|
$
|
356,015
|
|
|
|
$
|
224,483
|
|
|
|
$
|
484,645
|
|
|
|
$
|
429,010
|
|
|
|
$
|
370,455
|
|
Ratio of
expenses (including net current and deferred income tax
(benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense) to
average net assets
(8)(9)(10)
|
|
|
|
16.21
|
%
|
|
|
|
26.33
|
%
|
|
|
|
(21.81
|
)%
|
|
|
|
10.51
|
%
|
|
|
|
17.38
|
%
|
|
|
|
1.29
|
%
|
Ratio of expenses (excluding net current
and deferred income tax (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense) to
average net assets
(8)(10)(11)
|
|
|
|
4.12
|
%
|
|
|
|
3.91
|
%
|
|
|
|
6.51
|
%
|
|
|
|
4.46
|
%
|
|
|
|
3.47
|
%
|
|
|
|
1.39
|
%
|
Ratio of
net investment income (loss) to average net assets (including
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
current and
deferred income tax (benefit) expense)
(8)(9)(10)
|
|
|
|
(16.55
|
)%
|
|
|
|
(24.74
|
)%
|
|
|
|
23.33
|
%
|
|
|
|
(9.84
|
)%
|
|
|
|
(16.31
|
)%
|
|
|
|
0.60
|
%
|
Ratio of net investment income (loss) to
average net assets (excluding net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
current and
deferred income tax (benefit) expense)
(8)(10)(11)
|
|
|
|
(4.46
|
)%
|
|
|
|
(2.32
|
)%
|
|
|
|
(4.99
|
)%
|
|
|
|
(3.79
|
)%
|
|
|
|
(2.40
|
)%
|
|
|
|
0.50
|
%
|
Portfolio
turnover rate
(8)
|
|
|
|
14.58
|
%
|
|
|
|
14.86
|
%
|
|
|
|
6.44
|
%
|
|
|
|
9.90
|
%
|
|
|
|
5.56
|
%
|
|
|
|
0.08
|
%
|
Short-term borrowings, end of period
(000’s)
|
|
|
$
|
1,600
|
|
|
|
$
|
14,600
|
|
|
|
|
—
|
|
|
|
$
|
24,700
|
|
|
|
$
|
28,000
|
|
|
|
|
—
|
|
Long-term
debt obligations, end of period (000’s)
|
|
|
$
|
90,000
|
|
|
|
$
|
90,000
|
|
|
|
$
|
90,000
|
|
|
|
$
|
190,000
|
|
|
|
$
|
120,000
|
|
|
|
$
|
120,000
|
|
Preferred stock, end of period
(000’s)
|
|
|
$
|
65,000
|
|
|
|
$
|
60,000
|
|
|
|
$
|
95,000
|
|
|
|
$
|
110,000
|
|
|
|
$
|
70,000
|
|
|
|
|
—
|
|
Per common
share amount of long-term debt obligations outstanding,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
end of
period
|
|
|
$
|
4.70
|
|
|
|
$
|
5.03
|
|
|
|
$
|
5.15
|
|
|
|
$
|
10.92
|
|
|
|
$
|
7.49
|
|
|
|
$
|
7.52
|
|
Per common share amount of net assets,
excluding long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
obligations,
end of period
|
|
|
$
|
25.97
|
|
|
|
$
|
24.93
|
|
|
|
$
|
18.00
|
|
|
|
$
|
38.76
|
|
|
|
$
|
34.28
|
|
|
|
$
|
30.75
|
|
Asset
coverage, per $1,000 of principal amount of long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
obligations
and short-term borrowings
(12)
|
|
|
|
6,160
|
|
|
|
$
|
4,977
|
|
|
|
$
|
4,550
|
|
|
|
$
|
3,770
|
|
|
|
$
|
4,372
|
|
|
|
$
|
4,087
|
|
Asset coverage ratio of long-term debt
obligations and short-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
borrowings
(12)
|
|
|
|
616
|
%
|
|
|
|
498
|
%
|
|
|
|
455
|
%
|
|
|
|
377
|
%
|
|
|
|
437
|
%
|
|
|
|
409
|
%
|
Asset
coverage, per $25,000 liquidation value per share of auction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
preferred
stock
(13)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
$
|
55,336
|
|
|
|
$
|
62,315
|
|
|
|
$
|
74,198
|
|
|
|
|
—
|
|
Asset coverage, per $10 liquidation value
per share of mandatory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
redeemable
preferred stock
(13)
|
|
|
$
|
36
|
|
|
|
$
|
32
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Asset
coverage ratio of preferred stock
(13)
|
|
|
|
360
|
%
|
|
|
|
316
|
%
|
|
|
|
221
|
%
|
|
|
|
249
|
%
|
|
|
|
297
|
%
|
|
|
|
—
|
|
(1)
|
Commencement of
Operations.
|
(2)
|
Information presented relates to a
share of common stock outstanding for the entire
period.
|
(3)
|
Represents the issuance of auction
preferred stock for the years ended November 30, 2007 and 2006. Represents
the issuance of common stock for the period from May 31, 2005 through
November 30, 2005.
|
(4)
|
Represents the premium of $0.09 per
share, less the underwriting discount and offering costs of $0.02 per
share for the period from December 1, 2009 through May 31, 2010.
Represents the premium of $0.02 per share, less the underwriting discount
and offering costs of $0.01 per share for the year ended November 30,
2009. Represents the premium on the shelf offering of less than $0.01 per
share, less the underwriting and offering costs of $0.13 per share for the
year ended November 30, 2007.
|
(5)
|
The per common share data for the
periods ended November 30, 2009, 2008, 2007, 2006 and 2005 do not reflect
the change in estimate of investment income and return of capital, for the
respective period. See Note 2C to the financial statements for further
disclosure.
|
(6)
|
The per common share data for the year
ended November 30, 2008 reflects the cumulative effect of adopting ASC
740-10, which was a $776,852 increase to the beginning balance of
accumulated net investment loss, or $(0.04) per share.
|
(7)
|
Not annualized. Total investment return
is calculated assuming a purchase of common stock at the beginning of
period (or initial public offering price) and a sale at the closing price
on the last day of the period reported (excluding brokerage commissions).
The calculation also assumes reinvestment of distributions at actual
prices pursuant to the Company’s dividend reinvestment
plan.
|
(8)
|
Annualized for periods less than one
full year.
|
(9)
|
For the period from December 1, 2009
through May 31, 2010, the Company accrued $144,176 for current income tax
expense and $24,653,110 for net deferred income tax expense. For the year
ended November 30, 2009, the Company accrued $302,906 for net current
income tax benefit and $65,242,595 for net deferred income tax expense.
For the year ended November 30, 2008, the Company accrued $427,891 for
current income tax expense and $114,309,765 for net deferred income tax
benefit. The Company accrued $30,376,674 and $54,292,114 for the years
ended November 30, 2007 and 2006, respectively, for current and deferred
income tax expense. For the period from May 31, 2005 through November 30,
2005, the Company accrued $192,462 in net deferred income tax
benefit.
|
(10)
|
The expense ratios and net investment
income (loss) ratios do not reflect the effect of distributions to auction
preferred stockholders.
|
(11)
|
This ratio excludes the impact of
current and deferred income taxes.
|
(12)
|
Represents value of total assets less
all liabilities and indebtedness not represented by long-term debt
obligations, short-term borrowings and preferred stock at the end of the
period divided by long-term debt obligations and short-term borrowings
outstanding at the end of the period.
|
(13)
|
Represents value of total assets less
all liabilities and indebtedness not represented by long-term debt
obligations, short-term borrowings and preferred stock at the end of the
period divided by the sum of long-term debt obligations, short-term
borrowings and preferred stock outstanding at the end of the
period.
|
See accompanying Notes
to Financial Statements.
10
|
|
Tortoise Energy Capital Corp.
|
N
OTES
TO
F
INANCIAL
S
TATEMENTS
(Unaudited)
May 31,
2010
|
1. Organization
Tortoise Energy
Capital Corporation (the “Company”) was organized as a Maryland corporation on
March 4, 2005, and is a non-diversified, closed-end management investment
company under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Company’s investment objective is to seek a high level of total return with
an emphasis on current distributions to stockholders. The Company seeks to
provide its stockholders with an efficient vehicle to invest in the energy
infrastructure sector. The Company received the proceeds of its initial public
offering and commenced operations on May 31, 2005. The Company’s stock is listed
on the New York Stock Exchange under the symbol “TYY.”
2. Significant Accounting Policies
A. Use of Estimates
The preparation of
financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities, recognition of distribution income,
and disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
B. Investment Valuation
The Company
primarily owns securities that are listed on a securities exchange or
over-the-counter market. The Company values those securities at their last sale
price on that exchange or over-the-counter market on the valuation date. If the
security is listed on more than one exchange, the Company uses the price from
the exchange that it considers to be the principal exchange on which the
security is traded. Securities listed on the NASDAQ will be valued at the NASDAQ
Official Closing Price, which may not necessarily represent the last sale price.
If there has been no sale on such exchange or over-the-counter market on such
day, the security will be valued at the mean between the last bid price and last
ask price on such day.
The Company may
invest up to 50 percent of its total assets in restricted securities. Restricted
securities are subject to statutory or contractual restrictions on their public
resale, which may make it more difficult to obtain a valuation and may limit the
Company’s ability to dispose of them. Investments in restricted securities and
other securities for which market quotations are not readily available will be
valued in good faith by using fair value procedures approved by the Board of
Directors. Such fair value procedures consider factors such as discounts to
publicly traded issues, time until conversion date, securities with similar
yields, quality, type of issue, coupon, duration and rating. If events occur
that affect the value of the Company’s portfolio securities before the net asset
value has been calculated (a “significant event”), the portfolio securities so
affected will generally be priced using fair value procedures.
An equity security
of a publicly traded company acquired in a direct placement transaction may be
subject to restrictions on resale that can affect the security’s liquidity and
fair value. Such securities that are convertible into or otherwise will become
freely tradable will be valued based on the market value of the freely tradable
security less an applicable discount. Generally, the discount will initially be
equal to the discount at which the Company purchased the securities. To the
extent
that such securities
are convertible or otherwise become freely tradable within a time frame that may
be reasonably determined, an amortization schedule may be used to determine the
discount.
The Company
generally values debt securities at prices based on market quotations for such
securities, except those securities purchased with 60 days or less to maturity
are valued on the basis of amortized cost, which approximates market value.
C. Security Transactions and Investment
Income
Security
transactions are accounted for on the date the securities are purchased or sold
(trade date). Realized gains and losses are reported on an identified cost
basis. Interest income is recognized on the accrual basis, including
amortization of premiums and accretion of discounts. Dividend and distribution
income is recorded on the ex-dividend date. Distributions received from the
Company’s investments in master limited partnerships (“MLPs”) generally are
comprised of ordinary income, capital gains and return of capital from the MLPs.
The Company allocates distributions between investment income and return of
capital based on estimates made at the time such distributions are received.
Such estimates are based on historical information available from each MLP and
other industry sources. These estimates may subsequently be revised based on
actual allocations received from MLPs after their tax reporting periods are
concluded, as the actual character of these distributions is not known until
after the fiscal year end of the Company.
For the period from
December 1, 2008 through November 30, 2009, the Company estimated the allocation
of investment income and return of capital for the distributions received from
MLPs within the Statement of Operations. For this period, the Company had
estimated approximately 13 percent of total distributions as investment income
and approximately 87 percent as return of capital.
Subsequent to
November 30, 2009, the Company reallocated the amount of investment income and
return of capital it recognized for the period from December 1, 2008 through
November 30, 2009 based on the 2009 tax reporting information received from the
individual MLPs. This reclassification amounted to a decrease in pre-tax net
investment income of approximately $3,083,000 or $0.161 per share ($1,914,000 or
$0.100 per share, net of deferred tax benefit); an increase in unrealized
appreciation of investments of approximately $2,730,000 or $0.142 per share
($1,695,000 or $0.088 per share, net of deferred tax expense) and an increase in
realized gains of approximately $353,000 or $0.019 per share ($219,000 or $0.012
per share, net of deferred tax expense) for the period from December 1, 2009
through May 31, 2010.
Subsequent to the
period ended February 28, 2010, the Company reallocated the amount of investment
income and return of capital recognized in the current fiscal year based on its
revised 2010 estimates. This reclassification amounted to a decrease in pre-tax
net investment income of approximately $434,000 or $0.023 per share ($270,000 or
$0.014 per share, net of deferred tax benefit); an increase in unrealized
appreciation of investments of approximately $560,000 or $0.029 per share
($348,000 or $0.018 per share, net of deferred tax expense) and a decrease in
realized gains of approximately $126,000 or $0.006 per share ($78,000 or $0.004
per share, net of deferred tax benefit).
2010 2nd Quarter Report
|
|
11
|
N
OTES
TO
F
INANCIAL
S
TATEMENTS
(Unaudited)
(Continued)
|
D. Distributions to Stockholders
Distributions to
common stockholders are recorded on the ex-dividend date. The Company may not
declare or pay distributions to its common stockholders if it does not meet
asset coverage ratios required under the 1940 Act or the rating agency
guidelines for its debt and preferred stock following such distribution. The
character of distributions to common stockholders made during the year may
differ from their ultimate characterization for federal income tax purposes. For
the year ended November 30, 2009 and the period ended May 31, 2010, the
Company’s distributions to common stockholders for book purposes were comprised
of 100 percent return of capital. For the year ended November 30, 2009, the
Company’s distributions to common stockholders for tax purposes were comprised
of 100 percent return of capital. The tax character of distributions paid to
common stockholders for the current year will be determined subsequent to
November 30, 2010.
Distributions to
mandatory redeemable preferred stockholders are paid on the first business day
of each month. These distributions are accrued daily based on a fixed annual
rate of 5.60 percent. The Company may not declare or pay distributions to its
mandatory redeemable preferred stockholders if it does not meet a 200 percent
asset coverage ratio for its debt or the rating agency basic maintenance amount
for the debt following such distribution. The character of distributions to
preferred stockholders made during the year may differ from their ultimate
characterization for federal income tax purposes. For the year ended November
30, 2009 and for the period ended May 31, 2010, the Company’s distributions to
preferred stockholders for book purposes were comprised of 100 percent return of
capital. For the year ended November 30, 2009, the company’s distributions to
preferred stockholders for tax purposes were comprised of 100 percent return of
capital. The tax character of distributions paid to preferred stockholders for
the current year will be determined subsequent to November 30,
2010.
E. Federal Income
Taxation
The Company, as a
corporation, is obligated to pay federal and state income tax on its taxable
income. Currently, the highest regular marginal federal income tax rate for a
corporation is 35 percent. The Company may be subject to a 20 percent federal
alternative minimum tax on its federal alternative minimum taxable income to the
extent that its alternative minimum tax exceeds its regular federal income
tax.
The Company invests
its assets primarily in MLPs, which generally are treated as partnerships for
federal income tax purposes. As a limited partner in the MLPs, the Company
reports its allocable share of the MLP’s taxable income in computing its own
taxable income. The Company’s tax expense or benefit is included in the
Statement of Operations based on the component of income or gains (losses) to
which such expense or benefit relates. Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. A valuation allowance is recognized if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred income tax asset will not be realized.
F. Organization Expenses, Offering and
Debt Issuance Costs
The Company was
responsible for paying all organizational expenses, which were expensed as
incurred. Offering costs related to the issuance of common and preferred stock
are charged to additional paid-in capital when the stock is issued. Offering
costs (excluding underwriter commissions) of $108,000 related to the issuance of
common stock were recorded to additional paid-in capital during the period ended
May 31, 2010. Debt issuance costs related to long-term debt obligations and
Mandatory Redeemable Preferred (“MRP”) Stock are capitalized and amortized over
the period the debt and MRP Stock is outstanding. The amount of such capitalized
costs (excluding underwriter commissions) for the MRP Stock issued in December
2009 was $16,152.
G. Derivative Financial
Instruments
The Company may use
derivative financial instruments (principally interest rate swap contracts) in
an attempt to manage interest rate risk. The Company has established policies
and procedures for risk assessment and the approval, reporting and monitoring of
derivative financial instrument activities. The Company does not hold or issue
derivative financial instruments for speculative purposes. All derivative
financial instruments are recorded at fair value with changes in fair value
during the reporting period, and amounts accrued under the agreements, included
as unrealized gains or losses in the accompanying Statement of Operations.
Monthly cash settlements under the terms of the derivative instruments and
termination of such contracts are recorded as realized gains or losses in the
accompanying Statement of Operations. The Company did not hold any derivative
financial instruments during the period ended May 31, 2010.
H. Indemnifications
Under the Company’s
organizational documents, its officers and directors are indemnified against
certain liabilities arising out of the performance of their duties to the
Company. In addition, in the normal course of business, the Company may enter
into contracts that provide general indemnifications to other parties. The
Company’s maximum exposure under these arrangements is unknown, as this would
involve future claims that may be made against the Company that have not yet
occurred, and may not occur. However, the Company has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be
remote.
I. Recent Accounting Pronouncement
Standard on Fair Value Measurement
On January 21,
2010, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update No. 2010-06,
Improving Disclosures about Fair Value
Measurements,
which
amends FASB Accounting Standards Codification Topic 820,
Fair Value Measurements and
Disclosures,
and
requires additional disclosures regarding fair value measurements. Specifically,
the amendment requires reporting entities to disclose (i) the input and
valuation techniques used to measure fair value for both recurring and
nonrecurring fair value measurements, for Level 2 or Level 3 positions, (ii)
transfers between all levels (including Level 1 and Level 2) on a gross basis
(i.e. transfers out must be disclosed separately from transfers in) as well as
the
12
|
|
Tortoise Energy Capital Corp.
|
N
OTES
TO
F
INANCIAL
S
TATEMENTS
(Unaudited)
(Continued)
|
reason(s) for the
transfer, and (iii) purchases, sales, issuances, and settlements on a gross
basis in the Level 3 rollforward rather than as one net number. The effective
date of the amendment is for interim and annual periods beginning after December
15, 2009; however, the requirement to provide the Level 3 activity for
purchases, sales, issuances, and settlements on a gross basis will be effective
for interim and annual periods beginning after December 15, 2010. The Company
has adopted the disclosures required by this amendment, which did not have a
material impact on the financial statements.
3. Concentration of Risk
Under normal
circumstances, the Company will have at least 80 percent of its net assets, plus
any borrowings for investment purposes, invested in equity securities of
entities in the energy sector and at least 80 percent of its total assets in
equity securities of MLPs and their affiliates in the energy infrastructure
sector. The Company will not invest more than 15 percent of its total assets in
any single issuer as of the time of purchase. The Company may invest up to 50
percent of its total assets in restricted securities, all of which may be
illiquid securities. The Company may invest up to 20 percent of its total assets
in debt securities, including securities rated below investment grade. In
determining application of these policies, the term “total assets” includes
assets obtained through leverage. Companies that primarily invest in a
particular sector may experience greater volatility than companies investing in
a broad range of industry sectors. The Company may, for defensive purposes,
temporarily invest all or a significant portion of its assets in investment
grade securities, short-term debt securities and cash or cash equivalents. To
the extent the Company uses this strategy, it may not achieve its investment
objective.
4. Agreements
The Company has
entered into an Investment Advisory Agreement with Tortoise Capital Advisors,
L.L.C. (the “Adviser”). Under the terms of the agreement, the Company pays the
Adviser a fee equal to an annual rate of 0.95 percent of the Company’s average
monthly total assets (including any assets attributable to leverage and
excluding any net deferred tax asset) minus accrued liabilities (other than net
deferred tax liability, debt entered into for purposes of leverage and the
aggregate liquidation preference of outstanding preferred stock) (“Managed
Assets”), in exchange for the investment advisory services provided.
The Company has
engaged U.S. Bancorp Fund Services, LLC to serve as the Company’s administrator.
The Company pays the administrator a monthly fee computed at an annual rate of
0.04 percent of the first $1,000,000,000 of the Company’s Managed Assets, 0.01
percent on the next $500,000,000 of Managed Assets and 0.005 percent on the
balance of the Company’s Managed Assets.
Computershare Trust
Company, N.A. serves as the Company’s transfer agent, dividend paying agent, and
agent for the automatic dividend reinvestment plan.
U.S. Bank, N.A.
serves as the Company’s custodian. The Company pays the custodian a monthly fee
computed at an annual rate of 0.004 percent of the Company’s portfolio assets,
plus portfolio transaction fees.
5. Income Taxes
Deferred income
taxes reflect the net tax effect of temporary differences between the carrying
amount of assets and liabilities for financial reporting and tax purposes.
Components of the Company’s deferred tax assets and liabilities as of May 31,
2010, are as follows:
Deferred tax assets:
|
|
|
|
Net operating loss carryforwards
|
|
$
|
14,804,108
|
Capital
loss carryforwards
|
|
|
31,285,652
|
Alternative minimum tax credit
carryforward
|
|
|
135,201
|
Organization costs
|
|
|
15,512
|
|
|
|
46,240,473
|
Deferred tax liabilities:
|
|
|
|
Basis reduction of investment in
MLPs
|
|
|
25,457,713
|
Net
unrealized gains on investment securities
|
|
|
80,664,065
|
|
|
|
106,121,778
|
Total net
deferred tax liability
|
|
$
|
59,881,305
|
|
|
|
|
At May 31, 2010, a
valuation allowance on deferred tax assets was not deemed necessary because the
Company believes it is more likely than not that there is an ability to realize
its deferred tax assets based on the Company’s estimates of the timing of the
reversal of deferred tax liabilities. Any adjustments to such estimates will be
made in the period such determination is made. The Company’s policy is to record
interest and penalties on uncertain tax positions as part of tax expense. As of
May 31, 2010, the Company had no uncertain tax positions and no penalties and
interest were accrued. All tax years since inception remain open to examination
by federal and state tax authorities.
Total income tax
expense differs from the amount computed by applying the federal statutory
income tax rate of 35 percent to net investment loss and realized and unrealized
gains on investments before taxes for the period ended May 31, 2010, as
follows:
Application of statutory income tax
rate
|
|
$
|
22,140,628
|
State income taxes, net of federal tax benefit
|
|
|
1,834,509
|
Foreign tax expense, net of federal
tax benefit
|
|
|
89,533
|
Other
|
|
|
732,616
|
Total income
tax expense
|
|
$
|
24,797,286
|
|
|
|
|
Total income taxes
are computed by applying the federal statutory rate plus a blended state income
tax rate.
For the period from
December 1, 2009 through May 31, 2010, the components of income tax expense
include current foreign tax expense (for which the federal tax benefit is
reflected in deferred tax expense) of $144,176 and deferred federal and state
income tax expense (net of federal tax benefit) of $22,766,724 and $1,886,386,
respectively.
2010 2nd Quarter Report
|
|
13
|
N
OTES
TO
F
INANCIAL
S
TATEMENTS
(Unaudited)
(Continued)
|
As of November 30,
2009, the Company had a net operating loss for federal income tax purposes of
approximately $33,674,000. The net operating loss may be carried forward for 20
years. If not utilized, this net operating loss will expire as follows:
$12,452,000, $18,390,000, $31,000 and $2,801,000 in the years ending November
30, 2026, 2027, 2028 and 2029, respectively. As of November 30, 2009, the
Company had a capital loss carryforward of approximately $93,000,000, which may
be carried forward for 5 years. If not utilized, this capital loss will expire
as follows: $48,000,000 and $45,000,000 in the years ending November 30, 2013
and 2014, respectively. The amount of deferred tax asset for these items at May
31, 2010 also includes amounts for the period from December 1, 2009 through May
31, 2010. For corporations, capital losses can only be used to offset capital
gains and cannot be used to offset ordinary income. As of November 30, 2009, an
alternative minimum tax credit of $135,201 was available, which may be credited
in the future against regular income tax. This credit may be carried forward
indefinitely.
As of May 31, 2010,
the aggregate cost of securities for federal income tax purposes was
$352,672,663. The aggregate gross unrealized appreciation for all securities in
which there was an excess of fair value over tax cost was $284,961,773, the
aggregate gross unrealized depreciation for all securities in which there was an
excess of tax cost over fair value was $4,957,084 and the net unrealized
appreciation was $280,004,689.
6. Fair Value of Financial
Instruments
Various inputs are
used in determining the value of the Company’s investments. These inputs are
summarized in the three broad levels listed below:
Level 1 —
|
|
quoted prices
in active markets for identical investments
|
|
|
|
Level 2 —
|
|
other
significant observable inputs (including quoted prices for similar
investments, market corroborated inputs, etc.)
|
|
|
|
Level 3 —
|
|
significant
unobservable inputs (including the Company’s own assumptions in
determining the fair value of
investments)
|
The inputs or
methodology used for valuing securities are not necessarily an indication of the
risk associated with investing in those securities.
The following table
provides the fair value measurements of applicable Company assets by level
within the fair value hierarchy as of May 31, 2010. These assets are measured on
a recurring basis.
|
|
Fair Value at
|
|
|
|
|
|
|
Description
|
|
May 31, 2010
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Master Limited
Partnerships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Related Companies
(a)
|
|
|
$
|
632,625,172
|
|
|
|
$
|
632,625,172
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
Total Equity Securities
|
|
|
|
632,625,172
|
|
|
|
|
632,625,172
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Investment
(b)
|
|
|
|
52,180
|
|
|
|
|
52,180
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Total Other
|
|
|
|
52,180
|
|
|
|
|
52,180
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Total
|
|
|
$
|
632,677,352
|
|
|
|
$
|
632,677,352
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
(a)
|
|
All other industry classifications
are identified in the Schedule of Investments.
|
(b)
|
|
Short-term investment is a sweep
investment for cash balances in the Company at May 31,
2010.
|
Valuation Techniques
In general, and
where applicable, the Company uses readily available market quotations based
upon the last updated sales price from the principal market to determine fair
value. This pricing methodology applies to the Company’s Level 1
investments.
There were no
transfers between Level 1 and Level 2 for the period from December 1, 2009
through May 31, 2010.
7. Investment
Transactions
For the period from
December 1, 2009 through May 31, 2010, the Company purchased (at cost) and sold
securities (proceeds received) in the amount of $71,555,691 and $45,359,059
(excluding short-term debt securities), respectively.
8. Long-Term Debt
Obligations
The Company has
$90,000,000 aggregate principal amount of private senior notes, Series D, Series
E and Series F (collectively, the “Notes”) outstanding. The Notes are unsecured
obligations of the Company and, upon liquidation, dissolution or winding up of
the Company, will rank: (1) senior to all of the Company’s outstanding preferred
shares; (2) senior to all of the Company’s outstanding common stock; (3) on
parity with any unsecured creditors of the Company and any unsecured senior
securities representing indebtedness of the Company and (4) junior to any
secured creditors of the Company. Holders of the notes are entitled to receive
cash interest payments each quarter at a fixed annual rate until
maturity.
The Notes are
redeemable in certain circumstances at the option of the Company. The Notes are
also subject to a mandatory redemption if the Company fails to meet asset
coverage ratios required under the 1940 Act or the rating agency guidelines if
such failure is not waived or cured. At May 31, 2010, the Company was in
compliance with asset coverage covenants and basic maintenance covenants for its
senior notes.
Estimated fair
values of the Notes were calculated, for disclosure purposes, using the spread
between the AAA corporate finance debt rate and the U.S. Treasury rate with an
equivalent maturity date plus the average spread between the fixed rates of the
Notes and the AAA corporate finance debt rate. At May 31, 2010, the total spread
was applied to the equivalent U.S. Treasury rate for the series and future cash
flows were discounted to determine the estimated fair value. The following table
shows the issue date, maturity date, notional/carrying amount, estimated fair
value and fixed rate for each series of Notes outstanding at May 31,
2010.
|
|
|
|
|
|
Notional/
|
|
|
|
|
|
|
|
Issue
|
|
Maturity
|
|
Carrying
|
|
Estimated
|
|
Fixed
|
Series
|
|
Date
|
|
Date
|
|
Amount
|
|
Fair Value
|
|
Rate
|
Series D
|
|
December 21, 2007
|
|
December 21, 2014
|
|
$
|
39,400,000
|
|
$
|
42,680,723
|
|
6.07%
|
Series E
|
|
June 17, 2008
|
|
June 17, 2011
|
|
|
15,900,000
|
|
|
16,647,596
|
|
5.56%
|
Series F
|
|
June 17, 2008
|
|
June 17, 2013
|
|
|
34,700,000
|
|
|
37,803,885
|
|
6.02%
|
|
|
|
|
|
|
$
|
90,000,000
|
|
$
|
97,132,204
|
|
|
|
14
|
|
Tortoise Energy Capital Corp.
|
N
OTES
TO
F
INANCIAL
S
TATEMENTS
(Unaudited)
(Continued)
|
9. Preferred Stock
The Company has
10,000,000 shares of preferred stock authorized. Of that amount, the Company has
6,500,000 authorized shares of Mandatory Redeemable Preferred (“MRP”) Stock and
all 6,500,000 shares are outstanding at May 31, 2010. The MRP Stock has a
liquidation value of $10.00 per share plus any accumulated but unpaid
distributions, whether or not declared. The Company issued 6,000,000 and 500,000
shares MRP Stock on November 30, 2009 and December 4, 2009, respectively, and
they are mandatorily redeemable on November 30, 2016. The MRP Stock pays cash
distributions on the first business day of each month at an annual rate of 5.60
percent. The shares of MRP Stock trade on the NYSE under the symbol “TYY Pr A.”
The MRP Stock has
rights determined by the Board of Directors. Except as otherwise indicated in
the Company’s Charter or Bylaws, or as otherwise required by law, the holders of
MRP Stock have voting rights equal to the holders of common stock (one vote per
MRP share) and will vote together with the holders of shares of common stock as
a single class except on matters affecting only the holders of preferred stock
or the holders of common stock. The 1940 Act requires that the holders of any
preferred stock (including MRP Stock), voting separately as a single class, have
the right to elect at least two directors at all times.
At May 31, 2010,
the estimated fair value of the MRP Stock is based on the closing market price
of $10.20 per share. The following table shows the mandatory redemption date,
number of shares outstanding, aggregate liquidation preference, estimated fair
value and the fixed rate as of May 31, 2010.
|
|
Mandatory
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Redemption
|
|
Shares
|
|
Liquidation
|
|
Estimated
|
|
Fixed
|
Series
|
|
Date
|
|
Outstanding
|
|
Preference
|
|
Fair Value
|
|
Rate
|
MRP Stock
|
|
November 30, 2016
|
|
6,500,000
|
|
$65,000,000
|
|
$
|
66,300,000
|
|
5.60%
|
The MRP Stock is
redeemable in certain circumstances at the option of the Company. Under the
Investment Company Act of 1940, the Company may not declare dividends or make
other distributions on shares of common stock or purchases of such shares if, at
the time of the declaration, distribution or purchase, asset coverage with
respect to the outstanding MRP Stock would be less than 200 percent. The MRP
Stock is also subject to a mandatory redemption if the Company fails to meet an
asset coverage ratio of at least 225 percent as determined in accordance with
the 1940 Act or a rating agency basic maintenance amount if such failure is not
waived or cured. At May 31, 2010, the Company was in compliance with asset
coverage covenants and basic maintenance covenants for its MRP
Stock.
10. Credit Facility
The Company has a
revolving loan commitment amount of $50,000,000 that matures on June 20, 2010.
U.S. Bank, N.A. serves as a lender and the lending syndicate agent on behalf of
other lenders participating in the credit facility. Outstanding balances on the
credit facility accrue interest at a variable annual rate equal to one-month
LIBOR plus 2.00 percent and unused portions of the credit facility accrue a
non-usage fee equal to an annual rate of 0.25 percent.
The average
principal balance and interest rate for the period during which the credit
facility was utilized during the period ended May 31, 2010 was approximately
$7,700,000 and 2.26 percent, respectively. At May 31, 2010, the principal
balance outstanding was $1,600,000 at an interest rate of 2.35
percent.
Under the terms of
the credit facility, the Company must maintain asset coverage required under the
1940 Act. If the Company fails to maintain the required coverage, it may be
required to repay a portion of an outstanding balance until the coverage
requirement has been met. At May 31, 2010, the Company was in compliance with
the terms of the credit facility.
11. Common Stock
The Company has
100,000,000 shares of capital stock authorized and 19,165,514 shares outstanding
at May 31, 2010. Transactions in common stock for the period ended May 31, 2010,
were as follows:
Shares at November 30,
2009
|
|
17,892,957
|
Shares sold through shelf offerings
|
|
1,226,995
|
Shares issued through reinvestment
of distributions
|
|
45,562
|
Shares at May 31, 2010
|
|
19,165,514
|
|
|
|
12. Subsequent Events
The Company has
performed an evaluation of subsequent events through the date the financial
statements were issued and has determined that no additional items require
recognition or disclosure.
On June 1, 2010,
the Company paid a distribution in the amount of $0.40 per common share, for a
total of $7,666,206. Of this total, the dividend reinvestment amounted to
$979,643.
On June 20, 2010,
the Company entered into an amendment to its credit facility that extends the
credit facility through June 20, 2011. The terms of the amendment provide for an
unsecured revolving credit facility of $35,000,000. During the extension,
outstanding balances generally will accrue interest at a variable rate equal to
one-month LIBOR plus 1.25 percent and unused portions of the credit facility
will accrue a non-usage fee equal to an annual rate of 0.20
percent.
During the period
from June 1, 2010 through the date the financial statements were issued, the
Company issued 66,100 shares of common stock under its at-the-market equity
offering program for gross proceeds of approximately $1.6 million.
2010 2nd Quarter Report
|
|
15
|
A
DDITIONAL
I
NFORMATION
(Unaudited)
|
Stockholder Proxy Voting
Results
The annual meeting
of stockholders was held on May 21, 2010. The matters considered at the meeting,
together with the actual vote tabulations relating to such matters are as
follows:
1.
|
|
To elect two directors of the Company, to hold office for a term of
three years and until their successors are duly elected and
qualified.
|
|
|
No. of Shares
|
John R. Graham
|
|
|
Affirmative
|
|
22,208,452
|
Withheld
|
|
823,490
|
TOTAL
|
|
23,031,942
|
|
|
|
|
|
No. of Shares
|
H. Kevin Birzer*
|
|
|
Affirmative
|
|
5,771,142
|
Withheld
|
|
319,524
|
TOTAL
|
|
6,090,666
|
|
|
*Only preferred stockholders are
entitled to vote on this director.
|
|
|
|
Conrad S. Ciccotello continued as a director and his term expires
on the date of the 2011 annual meeting of stockholders, and Charles E.
Heath continued as a director and his term expires on the date of the 2012
annual meeting of stockholders.
|
|
2.
|
|
To approve a proposal to authorize flexibility to the Company to
sell its common shares for less than net asset value, subject to certain
conditions.
|
Vote of Common Stockholders
|
|
No. of
|
of Record (61 Stockholders of
|
|
Recordholders
|
Record as of Record Date)
|
|
Voting
|
Affirmative
|
|
32
|
Against
|
|
5
|
Abstain
|
|
5
|
Broker
Non-votes
|
|
0
|
TOTAL
|
|
42
|
|
|
|
Vote of Stockholders
|
|
No. of Shares
|
Affirmative
|
|
8,834,681
|
Against
|
|
1,461,861
|
Abstain
|
|
212,478
|
Broker
Non-votes
|
|
12,522,922
|
TOTAL
|
|
23,031,942
|
3.
|
|
To ratify the selection of Ernst & Young LLP as the independent
registered public accounting firm of the Company for its fiscal year
ending November 30, 2010.
|
|
|
No. of Shares
|
Affirmative
|
|
21,967,918
|
Against
|
|
272,695
|
Abstain
|
|
791,329
|
TOTAL
|
|
23,031,942
|
Based upon votes
required for approval, each of these matters passed.
Director and Officer
Compensation
The Company does
not compensate any of its directors who are “interested persons,” as defined in
Section 2(a)(19) of the 1940 Act, nor any of its officers. For the period ended
May 31, 2010, the aggregate compensation paid by the Company to the independent
directors was $52,500. The Company did not pay any special compensation to any
of its directors or officers.
Forward-Looking
Statements
This report
contains “forward-looking statements” within the meaning of the Securities Act
of 1933 and the Securities Exchange Act of 1934. By their nature, all
forward-
looking statements
involve risks and uncertainties, and actual results could differ materially from
those contemplated by the forward-looking statements. Several factors that could
materially affect the Company’s actual results are the performance of the
portfolio of investments held by it, the conditions in the U.S. and
international financial, petroleum and other markets, the price at which shares
of the Company will trade in the public markets and other factors discussed in
filings with the SEC.
Proxy Voting Policies
A description of
the policies and procedures that the Company uses to determine how to vote
proxies relating to portfolio securities owned by the Company and information
regarding how the Company voted proxies relating to the portfolio of securities
during the 12-month period ended June 30, 2009 are available to stockholders (i)
without charge, upon request by calling the Company at (913) 981-1020 or
toll-free at (866) 362-9331 and on the Company’s Web site at
www.tortoiseadvisors.com; and (ii) on the SEC’s Web site at
www.sec.gov.
Form N-Q
The Company files
its complete schedule of portfolio holdings for the first and third quarters of
each fiscal year with the SEC on Form N-Q. The Company’s Form N-Q is available
without charge upon request by calling the Company at (866) 362-9331 or by
visiting the SEC’s Web site at www.sec.gov. In addition, you may review and copy
the Company’s Form N-Q at the SEC’s Public Reference Room in Washington D.C. You
may obtain information on the operation of the Public Reference Room by calling
(800) SEC-0330.
The Company’s Form
N-Qs are also available on the Company’s Web site at
www.tortoiseadvisors.com.
Statement of Additional
Information
The Statement of
Additional Information (“SAI”) includes additional information about the
Company’s directors and is available upon request without charge by calling the
Company at (866) 362-9331 or by visiting the SEC’s Web site at
www.sec.gov.
Certifications
The Company’s Chief
Executive Officer has submitted to the New York Stock Exchange the annual CEO
certification as required by Section 303A.12(a) of the NYSE Listed Company
Manual.
The Company has
filed with the SEC, as an exhibit to its most recently filed N-CSR, the
certification of its Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act.
Privacy Policy
In order to conduct
its business, the Company collects and maintains certain nonpublic personal
information about its stockholders of record with respect to their transactions
in shares of the Company’s securities. This information includes the
stockholder’s address, tax identification or Social Security number, share
balances, and distribution elections. We do not collect or maintain personal
information about stockholders whose share balances of our securities are held
in “street name” by a financial institution such as a bank or
broker.
We do not disclose
any nonpublic personal information about you, the Company’s other stockholders
or the Company’s former stockholders to third parties unless necessary to
process a transaction, service an account, or as otherwise permitted by
law.
To protect your
personal information internally, we restrict access to nonpublic personal
information about the Company’s stockholders to those employees who need to know
that information to provide services to our stockholders. We also maintain
certain other safeguards to protect your nonpublic personal
information.
16
|
|
Tortoise Energy Capital Corp.
|
Office of the Company and
of
the Investment Adviser
Tortoise
Capital Advisors, L.L.C.
11550 Ash Street, Suite 300
Leawood, Kan.
66211
(913) 981-1020
(913) 981-1021 (fax)
www.tortoiseadvisors.com
Managing Directors
of
Tortoise Capital Advisors, L.L.C.
H. Kevin
Birzer
Zachary A. Hamel
Kenneth P. Malvey
Terry Matlack
David
J. Schulte
Board of Directors of
Tortoise Energy Capital Corp.
H. Kevin Birzer,
Chairman
Tortoise Capital Advisors, L.L.C.
Conrad S.
Ciccotello
Independent
John R.
Graham
Independent
Charles E.
Heath
Independent
|
ADMINISTRATOR
U.S. Bancorp Fund Services,
LLC
615 East Michigan St.
Milwaukee, Wis. 53202
CUSTODIAN
U.S. Bank, N.A.
1555 North Rivercenter Drive, Suite
302
Milwaukee, Wis. 53212
TRANSFER, DIVIDEND
DISBURSING
AND REINVESTMENT AGENT
Computershare Trust Company,
N.A.
P.O. Box 43078
Providence, R.I.
02940-3078
(888) 728-8784
(312)
588-4990
www.computershare.com
Legal
Counsel
Husch Blackwell Sanders LLP
4801 Main St.
Kansas City, Mo. 64112
INVESTOR
RELATIONS
(866) 362-9331
info@tortoiseadvisors.com
STOCK
SYMBOL
Listed NYSE Symbol: TYY
This report
is for stockholder information. This is not a
prospectus intended for
use in the purchase or sale of
fund shares.
Past performance is no guarantee of
future results and your investment may be worth
more or less at
the time you
sell.
|
Tortoise Capital
Advisors’ Public Investment Companies
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
Ticker/
|
|
Primary Target
|
|
Investor
|
|
as of
6/30/10
|
Name
|
|
Inception Date
|
|
Investments
|
|
Suitability
|
|
($ in
millions)
|
Tortoise Energy
|
|
TYY
|
|
U.S. Energy
Infrastructure
|
|
Retirement Accounts
|
|
$675
|
|
Capital Corp.
|
|
May 2005
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
|
|
Taxable Accounts
|
|
|
|
|
|
Tortoise
Energy
|
|
TYG
|
|
U.S. Energy
Infrastructure
|
|
Retirement Accounts
|
|
$1,272
|
|
Infrastructure Corp.
|
|
Feb. 2004
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
|
|
Taxable Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tortoise North
|
|
TYN
|
|
U.S. Energy
Infrastructure
|
|
Retirement Accounts
|
|
$171
|
|
American Energy Corp.
|
|
Oct. 2005
|
|
|
|
Pension Plans
|
|
|
|
|
|
|
|
|
|
Taxable Accounts
|
|
|
|
|
|
Tortoise
Capital
|
|
TTO
|
|
U.S. Energy
Infrastructure
|
|
Retirement Accounts
|
|
$81
|
|
Resources
Corp.
|
|
Dec. 2005
|
|
Private and Micro Cap
|
|
Pension Plans
|
|
(as of
5/31/10)
|
|
|
(Feb. 2007 – IPO)
|
|
Public Companies
|
|
Taxable Accounts
|
|
|
|
|
|
|
|
|
|
|
|
Tortoise Power and Energy
|
|
TPZ
|
|
U.S. Power and Energy
Investment
|
|
Retirement Accounts
|
|
$187
|
|
Infrastructure Fund, Inc.
|
|
July 2009
|
|
Grade Debt and
Dividend-Paying
|
|
Pension Plans
|
|
|
|
|
|
|
Equity Securities
|
|
Taxable Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 2. Code of
Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial
Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and
Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed
Registrants.
Not applicable for semi-annual reports.
Item 6. Schedule of
Investments.
Schedule of Investments is included as part of the report to shareholders
filed under Item 1.
Item 7. Disclosure of Proxy Voting
Policies and Procedures for Closed-End Management
Investment
Companies.
Not applicable for semi-annual reports.
Item 8. Portfolio Managers of Closed-End
Management Investment Companies.
There have been no changes in the portfolio managers identified in
response to this Item in the Registrant’s most recent annual report on Form
N-CSR.
Item 9. Purchases of Equity Securities by
Closed-End Management Investment Company and
Affiliated
Purchasers.
|
|
|
|
(d)
|
|
|
|
(c)
|
Maximum Number
(or
|
|
|
|
Total Number
of
|
Approximate
Dollar
|
|
(a)
|
|
Shares (or
Units)
|
Value) of Shares
(or
|
|
Total Number
of
|
(b)
|
Purchased as Part
of
|
Units) that May
Yet
|
|
Shares (or
Units)
|
Average Price
Paid
|
Publicly
Announced
|
Be Purchased
Under
|
Period
|
Purchased
|
per Share (or
Unit)
|
Plans or
Programs
|
the Plans or
Programs
|
Month
#1
|
0
|
0
|
0
|
0
|
12/1/09-12/31/09
|
|
|
|
|
Month
#2
|
0
|
0
|
0
|
0
|
1/1/10-1/31/10
|
|
|
|
|
Month
#3
|
0
|
0
|
0
|
0
|
2/1/10-2/28/10
|
|
|
|
|
Month
#4
|
0
|
0
|
0
|
0
|
3/1/10-3/31/10
|
|
|
|
|
Month
#5
|
0
|
0
|
0
|
0
|
4/1/10-4/30/10
|
|
|
|
|
Month
#6
|
0
|
0
|
0
|
0
|
5/1/10-5/31/10
|
|
|
|
|
Total
|
0
|
0
|
0
|
0
|
Item 10. Submission of Matters to a Vote
of Security Holders.
None.
Item 11. Controls and
Procedures.
(a) The Registrant’s President and Chief Executive Officer and its Chief
Financial Officer have concluded that the Registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940
(the “1940 Act”)) are effective as of a date within 90 days of the filing date
of this report, based on the evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b)
under the Securities Exchange Act of 1934, as amended.
(b) There were no changes in the Registrant’s internal controls over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that
occurred during the Registrant’s second fiscal quarter of the period covered by
this report that have materially affected, or are reasonably likely to
materially affect, the Registrant’s internal control over financial reporting.
Item 12.
Exhibits.
(a)(1)
Any code of ethics or amendment thereto,
that is the subject of the disclosure required by Item 2, to the extent that the
Registrant intends to satisfy Item 2 requirements through filing of an exhibit.
Not applicable.
(2)
Certifications pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Filed herewith.
(3)
Any written solicitation to purchase
securities under Rule 23c-1 under the Act sent or given during the period
covered by the report by or on behalf of the Registrant to 10 or more persons.
None.
(b)
Certification pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant)
|
|
Tortoise
Energy Capital Corporation
|
|
By (Signature and Title)
|
|
/s/ David J.
Schulte
|
|
|
David J.
Schulte, President and Chief Executive Officer
|
|
|
|
Date July 29,
2010
|
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By (Signature and Title)
|
|
/s/ David J.
Schulte
|
|
|
David J.
Schulte, President and Chief Executive Officer
|
|
|
|
Date July 29, 2010
|
|
|
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By (Signature and Title)
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/s/ Terry
Matlack
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Terry
Matlack, Chief Financial Officer
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Date July 29, 2010
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